Flags fly above the entrance to the new Trump International Hotel on its opening day in Washington, DC, U.S. on September 12, 2016.
Photo:
Reuters

The Trump Organization’s methodology for measuring the revenue and profit it earns from foreign governments’ patronage is in line with hospitality industry accounting practices, despite coming under fire for a lack of transparency.

The closely-held Trump Organization which owns and operates hotels, resorts and clubs, presented the House Oversight Committee a pamphlet earlier this month laying out its accounting policy concerning foreign government profits. The company plans to donate these profits to the U.S. Treasury, a move President Donald Trump’s attorney first announced in January.

Rep. Elijah Cummings (D., Md.), the ranking Democrat on the committee, last week criticized the company’s explanation of why it couldn’t provide details of its handling of foreign profits, calling it “meager.” The House Oversight Committee in April requested the company detail exactly how it plans to identify and track those profits.

The Trump Organization’s document states it would be onerous to track revenues and attribute business-related costs to a particular customer.

Hospitality industry experts agree. A hotel would struggle to assign the cost of a dishwasher’s time or cleaning staff to a delegation of foreign dignitaries, or determine the profitability of a single patron from a sovereign wealth fund, for example.

Because of the types of costs incurred in the lodging industry, a greater effort to track revenues and expenses from a particular group is unlikely to yield a substantially different result, industry experts said.

“About 70% of expenses that run through a hotel are fixed expenses,” said Toni Repetti,

Assistant Professor at the William F. Harrah College of Hotel Administration at the University of Nevada, Las Vegas.

The Trump Organization plans to follow the “Uniform System of Accounts for the Lodging Industry” — an industry guideline for preparing financial statements — to calculate its profits and estimate its likely profits from foreign government revenues.

This will involve two steps. First, the company will calculate total revenues and subtract from them all expenses incurred in connection with the business. Next, the Trump Organization will pro-rate the profit calculation for its overall business to the segment of foreign government revenue it can identify, according to the pamphlet.

The bigger issue has less to do with accounting than with how the Trump Organization plans to identify its foreign government guests.

U.S. hotel guests are not required to present their passport upon checking in, unlike patrons of European hotels. However, even if they were, that would not be particularly helpful in identifying foreign government officials or employees of government-related entities.

The company said it will track direct billings to a foreign government made by its properties, banquets or other businesses. It will also track all electronic or check payments received from a “reasonably identifiable” foreign government entity.

The company warned that some foreign government entities, such as state controlled aerospace, bank, healthcare or energy entities, may not be “reasonably identifiable” as foreign government entities and thus would be excluded from the profit calculation.

The Trump Organization said it won’t require all guests to identify themselves, because that “would impede upon personal privacy and diminish the guest experience of our brand,” according to the pamphlet.

But doing so could be as simple as adding a check-box on the check-in registration form, said two former hotel-sector finance executives.

The company also could refuse to host such guests for the duration of Donald Trump’s presidency, they said.

There is still the problem of identifying walk-in customers who patronize hotel restaurants, spas, retail, entertainment and recreational facilities at the Trump venues. Some of the steepest margins are for drinks and meals, which are not necessarily consumed by registered guests, Ms. Repetti said.